Today is shaping up negative for Purplebricks Group plc (LON:PURP) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Bidders are definitely seeing a different story, with the stock price of UK£0.083 reflecting a 10% rise in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.
Following the latest downgrade, the current consensus, from the three analysts covering Purplebricks Group, is for revenues of UK£60m in 2023, which would reflect a noticeable 4.9% reduction in Purplebricks Group's sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 29% to UK£0.084. Yet prior to the latest estimates, the analysts had been forecasting revenues of UK£70m and losses of UK£0.056 per share in 2023. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
View our latest analysis for Purplebricks Group
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. Over the past five years, revenues have declined around 5.0% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 9.6% decline in revenue until the end of 2023. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to decline 7.3% annually. So it's pretty clear that Purplebricks Group sales are expected to decline at a faster rate than the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Purplebricks Group. Unfortunately they also downgraded their revenue estimates, and our aggregation of analyst estimates suggests that Purplebricks Group revenue is expected to perform worse than the wider market. We wouldn't be surprised to find shareholders feeling a bit shell-shocked, after these downgrades. It looks like analysts have become a lot more bearish on Purplebricks Group, and their negativity could be grounds for caution.